Principles of Cost Accounting
17th Edition
ISBN: 9781305087408
Author: Edward J. Vanderbeck, Maria R. Mitchell
Publisher: Cengage Learning
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Chapter 7, Problem 11E
a.
To determine
Compute the factory overhead allowed for the actual levels of production.
b.
To determine
Calculate the factory overhead per unit at 5,000, 5,200 and 4,500 unit levels of production.
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Cavy Company estimates that total factory overhead costs will be $1,039,500 for the year. Direct labor hours are estimated to be 110,000.
Norwall Company’s variable manufacturing overhead should be $3.00 per standard machine-hour and itsfixed manufacturing overhead should be $300,000 per period.The following information is available for a recent period:a. The denominator activity of 60,000 machine-hours is used to compute the predetermined overhead rate.b. At the 60,000 standard machine-hours level of activity, the company should produce 40,000 unitsof product.c. The company’s actual operating results were:Number of units produced .................................... 42,000Actual machine-hours ........................................... 64,000Actual variable overhead cost .............................. $185,600Actual fixed overhead cost ................................... $302,400Required:1. Compute the predetermined overhead rate and break it down into variable and fixed cost elements.2. Compute the standard hours allowed for the actual production.3. Compute the variable overhead rate and efficiency variances and the…
The Denmark Company estimates its factory overhead for the next period at 425,000. It is estimated that 500,000 units will be produced at a materials cost of 1,000,000 and will require 250,000 direct labor hours at an estimated cost of 1,062,500. The machines will run about 100,000 hours.
Required:
The predetermined factory overhead rate based on
1. Material Cost
2. Units of Production
3. Machine Hours
4. Direct Labor Cost
5. Direct Labor Hours
Chapter 7 Solutions
Principles of Cost Accounting
Ch. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - Prob. 3QCh. 7 - Prob. 4QCh. 7 - Explain zero-based budgeting and how it differs...Ch. 7 - Prob. 6QCh. 7 - Which operating budget must be prepared before the...Ch. 7 - Prob. 8QCh. 7 - Why is it important to have front-line managers...Ch. 7 - If the sales forecast estimates that 50,000 units...
Ch. 7 - What are the advantages and disadvantages of each...Ch. 7 - What three operating budgets can be prepared...Ch. 7 - Prob. 13QCh. 7 - What are the three budgets that are needed in...Ch. 7 - Why might Web-based budgeting be more useful than...Ch. 7 - What is a flexible budget?Ch. 7 - Why is a flexible budget better than a master...Ch. 7 - Why is it important to distinguish between...Ch. 7 - Why is the concept of relevant range important...Ch. 7 - In comparing actual sales revenue to flexible...Ch. 7 - How would you define the following? a. Theoretical...Ch. 7 - Is it possible for a factory to operate at more...Ch. 7 - If a factory operates at 100% of capacity one...Ch. 7 - How is the standard cost per unit for factory...Ch. 7 - When allocating service department costs to...Ch. 7 - The sales department of Macro Manufacturing Co....Ch. 7 - The sales department of F. Pollard Manufacturing...Ch. 7 - Barnes Manufacturing Co. forecast October sales to...Ch. 7 - Prepare a cost of goods sold budget for the Crest...Ch. 7 - Prepare a cost of goods sold budget for MacLaren...Ch. 7 - Roman Inc. has the following totals from its...Ch. 7 - Starburst Inc. has the following items and amounts...Ch. 7 - Using the following per-unit and total amounts,...Ch. 7 - Cortez Manufacturing, Inc. has the following...Ch. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Calculating factory overhead The normal capacity...Ch. 7 - The Sales Department of Minimus Inc. has forecast...Ch. 7 - Sales, production, direct materials, direct labor,...Ch. 7 - Budgeted selling and administrative expenses for...Ch. 7 - Prob. 4PCh. 7 - Selling and administrative expense budget and...Ch. 7 - Preparing a flexible budget Use the information in...Ch. 7 - Preparing a performance report Use the flexible...Ch. 7 - Preparing a performance report Use the flexible...Ch. 7 - Flexible budget for factory overhead Presented...Ch. 7 - Prob. 10PCh. 7 - Overhead application rate Creole Manufacturing...Ch. 7 - Overhead application rate Roll Tide Manufacturing...Ch. 7 - Flexible budgeting, performance measurement, and...
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- If a factory operates at 100% of capacity one month, 90% of capacity the next month, and 105% of capacity the next month, will a different cost per unit be charged to the work-in-process account each month for factory overhead assuming that a predetermined annual overhead rate is used?arrow_forwardGreen Bay Cheese Company estimates its overhead to be $375,000. It expects to have 125,000 direct labor hours costing $1,500,000 in labor and utilizing 15,000 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hoursarrow_forwardA company estimates its manufacturing overhead will be $840,000 for the next year. What is the predetermined overhead rate given each of the following Independent allocation bases? Budgeted direct labor hours: 90,615 Budgeted direct labor expense: $750000 Estimated machine hours: 150,000arrow_forward
- Crystal Pools estimates overhead will utilize 250,000 machine hours and cost $750,000. It takes 2 machine hours per unit, direct material cost of $14 per unit, and direct labor of $20 per unit. What is the cost of each unit produced?arrow_forwardSteeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hoursarrow_forwardThe cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be 3,150,000, and total direct labor costs would be 1,800,000. During February, the actual direct labor cost totalled 160,000, and factory overhead cost incurred totaled 283,900. a. What is the predetermined factory overhead rate based on direct labor cost? b. Journalize the entry to apply factory overhead to production for February. c. What is the February 28 balance of the account Factory OverheadBlending Department? d. Does the balance in part (c) represent over- or underapplied factory overhead?arrow_forward
- Boarders estimates overhead will utilize 160,000 machine hours and cost $80,000. It takes 4 machine hours per unit, direct material cost of $5 per unit, and direct labor of $5 per unit. What is the cost of each unit produced?arrow_forwardA company estimates its manufacturing overhead will be $750,000 for the next year. What is the predetermined overhead rate given the following independent allocation bases? Budgeted direct labor hours: 60,000 Budgeted direct labor expense: $1,500,000 Estimated machine hours: 100,000arrow_forwardBusiness Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows: The standard price paid per pound of direct materials is 1.60. The standard rate for labor is 8.00. Overhead is applied on the basis of direct labor hours. A plantwide rate is used. Budgeted overhead for the year is as follows: The company expects to work 12,000 direct labor hours during the year; standard overhead rates are computed using this activity level. For every small stapler produced, the company produces two regular staplers. Actual operating data for the year are as follows: a. Units produced: small staplers, 35,000; regular staplers, 70,000. b. Direct materials purchased and used: 56,000 pounds at 1.5513,000 for the small stapler and 43,000 for the regular stapler. There were no beginning or ending direct materials inventories. c. Direct labor: 14,800 hours3,600 hours for the small stapler and 11,200 hours for the regular stapler. Total cost of direct labor: 114,700. d. Variable overhead: 607,500. e. Fixed overhead: 350,000. Required: 1. Prepare a standard cost sheet showing the unit cost for each product. 2. Compute the direct materials price and usage variances for each product. Prepare journal entries to record direct materials activity. 3. Compute the direct labor rate and efficiency variances for each product. Prepare journal entries to record direct labor activity. 4. Compute the variances for fixed and variable overhead. Prepare journal entries to record overhead activity. All variances are closed to Cost of Goods Sold. 5. Assume that you know only the total direct materials used for both products and the total direct labor hours used for both products. Can you compute the total direct materials and direct labor usage variances? Explain.arrow_forward
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